Clear Eyed Capitalist

Archive for January, 2013

I’m really excited by the idea of Open Book Management – popularized by Jack Stack as “The Great Game of Business”. The basic concept is that you can greatly improve performance by engaging employees in the business side of the business. But Jack’s books are mostly great stories and grasping what exactly *is* OBM is a bit elusive. I think a key reason is that designing the process is really an art more than an easily check-list-able process. A friend recently asked me for advice and here’s the best I have right now:

My assessment of the key components:
1) the most creative challenge, define business processes clearly, and figure out how every employee’s role can ultimately impact the bottom line.
2) design metrics and systems for collecting them so public reporting can be done WEEKLY (daunting, but if you want folks to get feedback, adapt, and see results, weekly makes sense to me)
3) design compensation related to those metrics so employees actually own their own rewards (and perhaps lack thereof) for performance. they must be directly and algorithmically connected, not just “do well and you’ll be rewarded”.

IMHO this sounds like it’s a multi-month, likely iterative process that could easily take up to a year.

John Case is a prominent author that has written a few books. “Managing by the Numbers” is one I’ve liked enough to hand out copies of. The most useful tool for #1 I’ve seen is spreadsheet called the Mobley Matrix, another thing hard to come by because everybody is proprietary (frickin’ capitalists!) but looks like it’s covered on page 82 of “Driving Your Company’s Value” by Mard, Dunne, Osborne, & Rigby, which Google has as an e-book. It might be in that John Case book as well.

One tidbit I’ve picked up and retained – getting employees to buy into this process isn’t easy, most people don’t crave data the way I do and measurement feels threatening to many employees. One consultant suggested starting out by posting information so people can start to see some numbers and develop a feel for how they vary over time. Then have prediction games: who can predict how we’ll do on xxx number this month/quarter? (because that’s what you’re probably already able to generate as part of the standard accounting cycle). Get folks into the prediction part of it and see who gets hooked.

Another tidbit I’d add: I got to tour the Mondragon Cooperatives in Spain – a very professionally run business whose shareholders are the employees. They broke variable compensation over base (which is based on skill & position) into 3 components: you got compensation on your own performance against your metrics, you got compensation on the performance of your immediate team, and part of your compensation was based on the performance of the company as a whole. It find that a helpful lens.